Sebi wants listed cos to seek shareholder nod for keeping directors aged over 75
13 March 2019
Market regulator Securities and Exchange Board of India (Sebi) has made it mandatory for listed companies to obtain shareholder permission if they want to have one or more persons aged 75 years or more on their boards.
The new rule, which comes into effect on 1 April, will affect most of the top listed companies in the country who will now have to pass special resolutions to seek shareholder approval for keeping persons aged 75 years or more as a non-executive director on their boards.
The new rule would affect family-run companies most as any rejection of such proposals could bar founding promoters from continuing as non-executive board members.
As per information available with Prime Database, companies are rushing to pass special resolutions and take shareholder approval for the continuance of promoter directors on their respective boards.
Prominent companies such as Reliance Industries, Maruti Suzuki, Lupin, Colgate-Palmolive, Procter & Gamble, DLF, Kesoram Industries, Berger Paints, Emami, Glenmark, Apollo Hospitals and Century Textiles, have at least one board member aged over 75, according to the data tracking website.
Some of these companies may have already taken shareholders approval for the continuance of such directors.
While the law does not bar any person above 75 years to continue as director of any company, Sebi has mandated that such a member to continue as non-executive board member would require shareholder permission via a special resolution and even record the reason for it.
Section 161 of the Companies Act, 2013, states that a person can be appointed as an additional director in any board meeting and can be regularised as a director in the next annual general meeting (AGM) with the approval of shareholders. For the same, Sebi requires a ‘prior’ special resolution while the Companies Act, 2013, allows such an approval to be taken in the next AGM.